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Suppose that you have purchased a European Call option on 1 share of Stock X at a strike Price of $20. The option premium is
Suppose that you have purchased a European Call option on 1 share of Stock X at a strike Price of $20. The option premium is $4 per share.
Consider all possible market prices of Stock X on the expiration date. Answer the following questions:
- What is the market price on the expiration date that will render your option position break-even?
- What is the maximum possible profit from your position at the expiration?
- What is the maximum possible loss from your position at the expiration? At what price(s) will you suffer such loss?
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